appraising grain facilities

by Mason Spurgeon, Certified General Real Estate Appraiser

Having recently appraised two different types of grain facilities, I was reminded of how appraisers may need to follow different methods even when appraising the same kind of property. To the uninitiated, a grain facility is just a grain facility: they store grain and usually sell on a per bushel basis. But my two recent projects showed me that grain facilities fall into different classes of their own based on various factors—especially highest and best use, and overall condition.

The first facility I appraised was set up for a private farmer and was recently constructed. It was a very high capacity private facility with a loop system and over 230,000 bushels of storage. Sales for loop systems are very difficult to locate, but at Spurgeon Appraisals our sales research and appraiser network is second to none. After several hours of research, comparable sales for loop systems were finally located. Sales of newer facilities indicated a very low percentage of external obsolescence, which showed that these properties are in high demand, because a buyer is willing to pay what the seller has in the property’s construction costs, minus physical depreciation.

The same cannot be said for older facilities. The second facility I appraised was an old feed mill that was still in operation. However, after inspecting the facility and equipment I determined that the highest and best use was as a private grain facility rather than a feed mill. Small feed mills are not as prevalent as they once were. Many have gone out of business or converted to other types of operations. Because of the condition of the facility, the external obsolescence on this property was much higher than that of the first property appraised. Buyers of these older properties recognize that there is less demand and higher maintenance costs involved and will expect a discount.

Buyers of older facilities have to be vigilant. Maintenance costs and repair costs could be very high, which is the reason for the external obsolescence. Also, it may not be the exact setup or modern equipment the buyer wants, and the cost to add is very high. The overall setup of an older facility is typically not as well thought-out as a new facility. New facilities are often built with expansion in mind, whereas older facilities sometimes appear to be thrown together with little room for expansion.

At Spurgeon Appraisals, we strive to compete a thorough appraisal report with every aspect of the property taken into consideration. Call or email us today to see how we can help you with your appraisal needs.

Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.